A Loan against property is a credit facility provided by banks and non-banking financial companies against a borrower’s residential or commercial property such as an apartment, house, shop, or office. Borrowers are required to pledge their property as security until the loan amount is paid in full.
A LAP loan is an excellent way to secure capital when in need of instant funds. It can serve multiple purposes, which means that you can use the loan amount to fund your children’s higher education, wedding, international travel, or invest in a business. Factors based on which your loan against property eligibility is determined are; the property’s insured declared value, your income, and your credit history.
Critical mistakes to avoid while applying for a LAP loan
Several mistakes can potentially slow down your application process. They may even lead to your application’s rejection. Avoid the underlying mistakes while applying for a LAP loan.
Not providing the required loan against property documents
When applying for a loan against property, several documents are required to evaluate your property’s legitimacy and value. Based on these documents, the status of your application is decided. If you miss providing the required loan against property documents, your application may get rejected.
The documents include:
- Showcasing income proof with bank statements, ITR, and other financial statements.
- KYC documents proving your identity, address, and age.
- Property’s title chain.
Ignoring the loan against property eligibility criteria
You will not get a LAP loan by just having a property under your name. Every lender has a set of loans against property eligibility criteria that borrowers are required to meet. These requirements are:
- You must be at least 21 years of age at the time of application submission and 65 years at the end of the loan tenure.
- You can be either a salaried or self-employed individual to apply for a LAP loan and have an active bank account.
- The pledged property should be self-owned. If there are co-owners, they are all required to become co-applicants.
Ignoring your credit score
The credit score is an integral part of the application process, indicating the creditworthiness through your credit history. If you have maintained an excellent credit score, it will help you expedite application approval and get you favourable EMI and loan tenure. Since the loan against property is secured, it is not the sole factor based on which your eligibility is determined.
Not comparing interest rates
Since not every lender offers the same interest rates, comparing different lender’s interest rates is an integral part of your due diligence. It would be wise to compare at least 3 to 5 lenders’ rates and choose one that offers the lowest rate. The lower your interest rate, the lower EMIs you will have to pay every month.
Ignoring application approval time
Financial companies take pride in providing quick loan approval and disbursal facilities. However, in the case of a loan against a property, the loan approval time is longer than usual. After submitting your application, your lender will take some time to visit your property and analyze its market value. Your property’s value helps lenders decide the terms of your LAP loan. So, make sure to consider your application approval time to avoid being in a tough spot.